{"id":353989,"date":"2022-08-19T07:44:43","date_gmt":"2022-08-19T12:44:43","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/tax\/federal-taxes\/who-should-itemize.html"},"modified":"2023-06-26T11:51:49","modified_gmt":"2023-06-26T16:51:49","slug":"who-should-itemize","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/tax\/federal-taxes\/who-should-itemize.html","title":{"rendered":"Who Should Itemize?"},"content":{"rendered":"\n
\n \n
\n

Who Should Itemize?<\/h1>\n
\n
\n By J.P. Finet, J.D.<\/a> | Legally reviewed by Steven Ellison, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
\n

This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
\n

The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

\n

To understand the itemized deduction, you must first understand what a tax deduction is. You must also understand how the itemized deduction<\/a> differs from the standard deduction<\/a> every individual U.S. taxpayer is entitled to claim. <\/p>\n\n <\/div>\n\n

Quite simply, a tax deduction lowers the amount of tax you owe by reducing the amount of income subject to tax. The standard deduction is so-called because it is the same for all taxpayers, no matter how much or how little taxable income they have.<\/p>\r\n

However, some taxpayers have large deductible expenses and would see more tax savings by claiming them as itemized deductions. In other words, instead of claiming the lump-sum standard deduction amount, they add up each of their deductions as a separate item. If the total is greater than the standard deduction, they itemize their deduction to receive a larger tax benefit in the form of reduced tax liability. Additionally, non-residents outside the United States who earn U.S. income must itemize because they cannot claim the standard deduction.<\/p>\r\n

Working out the possible tax savings from itemizing your deductions can be complicated. But most popular tax software products, such as TurboTax, can perform the calculations necessary to determine your total itemized deduction. The software will then let you know if you’d benefit from itemizing to reduce your tax liability.<\/p>\r\n

Itemized deductions are reported on Schedule A (Form 1040)<\/a>, Itemized Deductions, and must be included with your federal income tax return. Tax deductions are different from tax credits in that they reduce the amount of income subject to tax. A tax credit lowers the tax you pay on that income.<\/p>\r\n

Reduced Popularity After Tax Law Change<\/h2>\r\n

Taxpayers have needed to weigh the benefits of itemizing since adding the standard deduction to the tax code in 1944. That analysis was difficult because the standard deduction was low enough that many taxpayers would receive a larger tax benefit by itemizing. But everything changed with the passage of the 2017 Tax Cuts and Jobs Act (TCJA)<\/a>.<\/p>\r\n

The TCJA nearly doubled the size of the standard deduction, increasing it from $6,500 for individual filers to $12,000 and from $13,000 to $24,000 for married filing jointly (MFJ). Adjusting those amounts for inflation, the standard deduction sits at $13,850 for 2023 and $27,700 for MFJ. For those choosing the head of household filing status, the standard deduction is $19,400 for 2023. The TCJA made other changes that made itemizing less attractive, including capping the amount of state and local taxes (SALT) that could be deducted at $10,000, which is known as the SALT cap.<\/p>\r\n

As a result of the TCJA’s changes, itemization became much less popular. Far fewer taxpayers had itemized deductions totaling more than the standard deduction. The 2022 estimate is that 90% of U.S. taxpayers chose to itemize. However, enough taxpayers benefit from claiming the itemized deduction that it may be worth exploring if you have a lot of deductible expenses.<\/p>\r\n

What Are Itemized Deductions?<\/h2>\r\n

Itemized deductions generally fall into five categories:<\/p>\r\n

    \r\n
  1. Homeowner’s expenses<\/li>\r\n
  2. State and local taxes<\/li>\r\n
  3. Charitable contributions<\/li>\r\n
  4. Out-of-pocket medical expenses<\/li>\r\n
  5. Miscellaneous<\/li>\r\n<\/ol>\r\n

    Explanations of each type are in the sections that follow.<\/p>\r\n

    Homeowner’s Expenses<\/h3>\r\n

    The U.S. tax code is generous to homeowners and gives them a number of tax benefits<\/a> not available to those who don’t own a home. The most significant of these benefits is the \u201chome mortgage interest deduction." This deduction lets homeowners deduct the mortgage interest they pay over the tax year from their reported income. Thus, the larger your home mortgage payment amount, the greater your tax benefit.<\/p>\r\n

    But there are some limits on the deduction that often end up punishing those who own homes in high-priced areas, like New York, San Francisco, and Los Angeles. Until the passage of the TCJA, homeowners could deduct the interest paid on home loans of up to $1 million. But the legislation lowered that amount to $750,000.<\/p>\r\n

    The deduction is available for mortgages used to purchase a house, condominium, co-op, mobile home, boat, or similar property, so long as it has sleeping, cleaning, and toilet facilities. To find the amount of mortgage interest you paid for a year, look at Form 1098, Mortgage Interest Statement, which servicers must mail out each January.<\/p>\r\n

    State and Local Taxes<\/h3>\r\n

    While subject to the $10,000 SALT cap, you can deduct amounts you pay for state and local taxes<\/a>. These include:<\/p>\r\n